Category Archives: Answers

Technology vs. Jobs

A question from LinkedIn:

How do you view the relationship between Technological Innovation and Job Creation?  A net positive, a net negative, net neutral?

The relationship between technological innovation and job creation is threefold:

  1. Technological innovation creates (relatively few) high-paying jobs for people who develop, deploy, and maintain the new technology (including not only engineers, but salesmen and marketers as well),
  2. Technological innovation makes certain types of jobs obsolete, but
  3. The well-paid engineers, salesmen and marketers have a demand for everything a well-paid person tends to buy, from houses and cars to designer coffees and sushi restaurants to modern health care. Hence, the relevant industries experience job growth. Note that this job growth can occur in both unskilled (retail salespeople) and highly skilled (doctors and nurses) occupations…

As to whether it is a “net positive” or “net negative” process, the answer is, IN TERMS OF WHAT? The sheer number of jobs has steadily increased, as technological progress tends to lead to workforce shifting out of more productive (meaning, highly automated) industries into less productive (meaning, hard to automate) ones.

The effect on wages, meanwhile, has been diverging. Workers who operate expensive machinery (say, locomotive operators) and workers who require extensive training (as in, for example, registered nurses) see their wages increase over time; those who don’t, face wage stagnation in nominal terns and thus its slow deterioration in real terms…

Do I really know something Steven Levitt doesn’t?

Steven Levitt writes:

Back in the old days, banks didn’t package and resell the mortgages they wrote. So when a homeowner got into trouble, they could go down and talk with the bank about working out some solution other than foreclosure. For instance, the bank could allow the borrower to pay back the loan over 30 years instead of 15 years, reducing the monthly payment.

Not really… Even in the old days (unless we’re talking really old days), the homeowner would not talk to the lender. Instead, they would talk to the servicer in charge of their loan (in the really old days, servicers were units of lender banks, but eventually, independent servicing companies sprang out all over the place). Here’s how Fannie Mae explains what servicers do and how they are compensated:

We do not perform the day-to-day servicing of the mortgage loans that are held in our mortgage portfolio or that back our Fannie Mae MBS… Typically, lenders who sell single-family mortgage loans to us initially service the mortgage loans they sell to us. There is an active market in which lenders sell servicing rights and obligations to other servicers.

Mortgage servicers typically collect and remit principal and interest payments, administer escrow accounts, monitor and report delinquencies, evaluate transfers of ownership interests, respond to requests for partial releases of security, and handle proceeds from casualty and condemnation losses. For problem loans, servicing includes negotiating workouts, engaging in loss mitigation and, if necessary, inspecting and preserving properties and processing foreclosures and bankruptcies. We have the right to remove servicing responsibilities from any servicer under criteria established in our contractual arrangements with servicers. We compensate servicers primarily by permitting them to retain a specified portion of each interest payment on a serviced mortgage loan, called a “servicing fee.” Servicers also generally retain prepayment premiums, assumption fees, late payment charges and other similar charges, to the extent they are collected from borrowers, as additional servicing compensation. We also compensate servicers for negotiating workouts on problem loans.

So from the borrower’s standpoint, not much has changed because of securitization; the borrower still deals mostly, of not exclusively, with the servicer.

I have four questions:

OK, let’s take them one at a time, keeping in mind that there are servicers…

1) With mortgage-backed securities, is it really the case that a given mortgage is stripped into multiple pieces held by different entities?

Not exactly. First, mortgages are assembled into a pool, which is structured as a separate legal entity with mortgages as its assets. Then, this pool can be stripped, with strips becoming the pool’s liabilities; the alternative is a simple pass-through structure. The company that puts the pool together (such as Fannie Mae) is the sole equity holder.

2) If mortgages really are stripped into pieces, how does foreclosure work? If many different firms hold a piece of the mortgage, who initiates foreclosure? Who pays the costs of foreclosure? It would seem to me that many of the same obstacles to working out a refinancing deal would be present for foreclosing as well.

Foreclosure works just as it used to before securitization. “Many firms holding pieces of the mortgage” are creditors and thus have no say in the foreclosure matters. The out-of-pocket costs of foreclosures are paid by the pool (meaning that in the end they accrue to the company that created the pool); the decision to initiate foreclosure is also made by the pool (meaning, essentially, by the company that has created the pool).

3) If mortgages are not stripped into pieces, are there firms out there trying to scoop up failing mortgages at rock-bottom prices and getting on the phone with the homeowners to try to negotiate deals to avoid foreclosure? If mortgages are not stripped into pieces, I don’t understand why it is so hard to value these mortgage-backed securities.

Where would those firms “trying to scoop up failing mortgages at rock-bottom prices” come from? By now, whoever wanted to invest in mortgages, already has more than they know what to do with; that’s why we have a credit crunch on hand… As to difficulties in valuation, they come not so much from stripping, but from uncertainties surrounding mortgages; the borrower can default (and the amount to be recovered from selling the foreclosed home is highly uncertain, as house prices change over time) or refinance. Neither of these eventualities is in control of the lender, so valuation ultimately depends on assumptions the lender makes about probabilities and timing of default and/or refinancing, as well as about the likely value of the home in the event of default.

4) If indeed mortgages are stripped into pieces, weren’t people worried about the complications that would result when these mortgages were divided into pieces?

Yes and no. Complications should be weighted against opportunities they afford. Mortgage securitization offered an easy and cost-effective way to invest in mortgages for mutual funds and insurance companies…

A weird Firefox upload/download problem (solved)

This morning, my Firefox started acting up. It would freeze when I attempt to upload a file or use the right-click Save As… functionality. Upon a closer look, however, it turned out it wasn’t really freezing, but taking a very long pause; eventually, the File Upload or Save As… (as the case may be) dialog would be displayed.

It turns out that the reason for this behavior is that I recently downloaded to (or uploaded from) a location that is no longer accessible. In my case, it was a folder on a network share, but I would guess something like this could also happen with a removable storage device, such as an external hard drive or a Flash drive. So Firefox was essentially trying to access the location it accessed before, taking its time to repeatedly try it and eventually failing.

Now that I understood what the problem really was, fixing it was a matter of seconds. I typed about:config into the Firefox address bar, scrolled down to configuration variable (highlighted in the picture below), and changed it from its old value (which was something like \\myServer\myFolder) to C:\temp, which was a name of a directory that exists on my system.

Firefox config window

Problem solved…

Sean Masaki Flynn explains author’s compensation

Sean Masaki Flynn, author of Economics For Dummies, answers a reader’s question on Freakonomics:

Q: Roughly what does one make for writing a Dummies book, and is it a more lucrative endeavor (in terms of dollars per hour) than the textbook route?

A: Author royalties are very paltry — both for textbooks and for other books. A typical royalty rate would be 6 percent or so of what the publisher can sell the book for at wholesale. That amount is typically half of the cover price. So if you see a hardcover selling for $30, the publisher probably got $15 at wholesale. So then 6 percent of that $15 would be only 90 cents. Then your literary agent will take 15 percent of that. So you are left with just 77 cents per copy.

And a book is considered a good seller if it sells 5,000 copies. Most sell far fewer. So basically, there is no money in publishing unless you can sell a lot of books.

Sadly, I am not J.K. Rowling.

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Include_HTML plugin: not-so-neat tricks

A question hoisted from comments:

I really want to use this plugin, seems perfect for me, but it doesnt seem to allow forms to work on the pages that are included. Is this possible? These are forms that would normally post to themselves.

There are options here, none of which is particularly elegant. Include_HTML was written to access content (including content from remote sites), not functionality…

One option is to include an iframe, show the form in that iframe and set the form’s target attribute to that same iframe. So when the form posts, only the iframe is updated. A slight variation of this approach is to write the included page as an AJAX client, so that it posts and updates without refreshing the whole WordPress page. This, by the way, is the approach used by the Contact Form plugin by Takayuki Miyoshi, which you can observe in action on the Contact page of this site.

Another way is to simply POST to the true location of the form and at the end of processing redirect back to the POSTing page (whose URL should be available as $_SERVER['HTTP_REFERER']).

But the most radical solution is simply to rewrite the plugin, requiring it to include() code rather than accessing content via file_get_contents().

Applying case formatting in Excel

A question from Askville:

Excel question – is there any way to apply a function in place?

A couple of examples – I have a cell that is in lower case and I want it to be upper case. Can I apply that function to the cell? or do I have to create another column, apply the function there, copy and paste special:values to get the cell in the format I want? Or taking a cell with a name in it that isn’t “proper” – can I do that against the existing cell without having to go through all those other convulsions?

You can, but you’ll need to write a macro to do it. Something along these lines:

Sub ApplyUpper()
  For Each Cell In Selection
    Cell.Value = UCase(Cell.Value)
  Next Cell
End Sub

Sub ApplyProper()
  For Each Cell In Selection
    Cell.Value = StrConv(Cell.Value, vbProperCase)
  Next Cell
End Sub

On real estate and interest rates

A question from Askville:

What’s the impact of the Fed’s $500B bailout on real estate and interest rate?

Will my mortgage interest rate drop dramatically in the next few months? (Planning to sell and trade up a bigger home for investment….)

Real estate prices, in spite of the recent drop, are still way out of line with both incomes and rents. As to mortgage interest rate, here’s a long-term picture for you to ponder (this is conventional mortgage rate as reported by Federal Reserve):

Mortgage Rates

As you can see, the current interest rates are still close to historic lows, so I wouldn’t expect a dramatic drop any time soon…

Stephen Dubner wonders about reading news

Stephen Dubner writes:

Admirim Luboteni, living in Kuala Lumpur, Malaysia, writes with a simple but hard question:

Which general news/business sites should one read daily to keep himself well-informed?

I will be interested to see how many people suggest aggregators like Newser or a new one I just heard about, NewsCred.

Also, I would add to Admirim’s question:

Which blogs?

The simple answer is, none.

News, by and large, is noise. It does nothing to keep you informed, it just gives you a convenient delusion of being informed. When you read news, you have to make two leaps of faith simultaneously, (1) that what the reporter says is true, and (2) that what the reporter says is important and/or relevant. Needless to say, there is never any assurance of either. People constantly forget this and construct a parallel mental universe, only superficially resembling the actual one, from news clippings. Suffice it to say that to this day, many people that consider themselves educated think that Word War I was caused by assassination of Franz Ferdinand, rather than by the gold standard…

Additionally, even if all news were true and relevant, you would still need the ability to put the news items into a proper context. And that ability simply cannot be gained by reading news; it requires a combination of raw intelligence and training.  But you can’t be trained in everything; there’s only so much you can know well.  Hence, a more complicated answer: to stay informed about the developments in your area of expertise, you need news sources that you yourself (or someone whose opinion you respect) deemed to be of sufficient quality in that area.  To give an extreme example, publications that cover horse racing well are unlikely to have an equally good coverage of developments in particle physics and vice versa.

As to blogs, they are a genre of literature. They are no more intended to keep you informed than romantic novels or Greek tragedy. Most blog writers out there are commentators, not reporters…

Including free-form PHP into WordPress

Update: include_HTML now has its own page.  

Every once in a while, there is a need to include free-form PHP (or HTML, or JavaScript) into a WordPress post or page (a recent post on WordPress support forums raised that problem yet again). This need can be addressed with a very simple plugin. The installation is, once again, WordPress standard; download and unzip the file, create an include-html directory on your WordPress server under wp-content/plugins, put include-html.php into it, and activate the plugin using WordPress’ administrative interface.

Usage is equally simple: create a file containing any combination of PHP, HTML, and/or JavaScript you want (for example, let’s say the file is accessible as and include it into your post or page as follows:


To see this plugin at work, you can look here; the “HTML file with relevant code” is included in the body of the post.

Restricting access to a WordPress post or page

A recent post on WordPress support forums asked if it were possible to restrict access to a WordPress post or page. I replied saying yes and suggested that the problem could be solved with a plugin. Well, it turned out to be a fun problem to contemplate, so here’s a rough first pass at that plugin. So far, no internationalization and no user-configurable error message; only post content is hidden (meaning that post title and comments, if any, are still visible to all). I am sure a lot of other nice things could be added, too, but the plugin seems to be functional and not dependent on version-specific features.

The installation is WordPress standard; download and unzip the file, create a restrict-to directory on your WordPress server under wp-content/plugins, put restrict-to.php into it, and activate the plugin using WordPress’ administrative interface.

To restrict access to a post or a page, put [restrict_to: user1, user2, user3] into the post or page in question, where user1, user2, user3 is a comma-separated list of users allowed to view the post or page (obviously, you can list as many or as few as you want, just don’t forget the commas). Users can be identified by their ID numbers or their login names (which will be handled in a case-insensitive fashion, so someuser, Someuser, and someUser will be perceived as identical).